The Quebec provincial prosecutor's office said the officers who fatally shot Alain Magloire last February will not face charges.
Magloire, 41, was shot dead on Feb. 3 by Montreal police officers outside the Berri bus station in downtown Montreal.
Officers had said he was wielding a hammer in a threatening manner and refused to co-operate.
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The prosecutor's office said it reviewed the Sûreté du Québec investigation and found no grounds to lay charges against the officers involved in the intervention.
Magloire, who was known at Montreal's Old Brewery, suffered from a mental illness.
The Quebec coroner's office has called for a public inquiry to look into police interventions involving people struggling with mental health problems.